HP's stock plunged 12% the Tuesday before Thanksgiving on news that it is writing off $8.8 billion because it overpaid for British software firm, Autonomy.

This comes on the heels of its announcement in May that it would lay off 27,000 employees. This latest move gives further credence that this once great, innovative company is turning into a shipwreck being led by yet another captain.

For the quarter than ended October 31 st, HP amassed a loss of $6.9 billion, or $3.49 a share. The write down of Autonomy represented only a portion of the bad news. According to the Los Angeles Times, "personal systems revenue was down 14% year over year; printing revenue declined 5%; services revenue fell 6%; and enterprise servers, storage and networking dropped 9%." The only bright spot is that software revenue was up 14% over the year before in spite of the Autonomy write off.

Brief History

Started in a garage by Messrs. Hewlett and Packard, Hewlett-Packard had a long track record of success. Starting in 1999, HP made a series of missteps that has left many scratching their heads about the company's leadership and direction.

Carly Fiorina was hired as CEO in 1999. Many say that she did a better job of promoting herself than improving Hewlett-Packard. Her fans positioned Carly as a star from Lucent Technologies. Those that know the story behind Lucent's collapse, however, paint a different picture. HP's board gave Carly $65 million in restricted stock to supposedly compensate her for the Lucent options she had to give up upon joining HP. However, soon after Carly left, the value of the Lucent options evaporated because of the huge uncollectable debt Lucent accumulated during her tenure. As a result of the collapse, Lucent was absorbed into Alcatel. HP's stock price and overall performance declined under her tenure, and her relations with descendants of the founders and others inside the company grew contentious. Many believe that her biggest sin was transforming a company that was an innovative market leader focused on high-growth, high-profit businesses into a company that was a market follower focused on low-growth, low-profit businesses. Carly Fiorina's severance package at the time was estimated between $21.4 and $42.4 million.

Mark Hurd replaced Ms. Fiorina in 2005. While at HP, he doubled the stock price and increased net income by high double digits. However, some say he did this by being an efficiency expert. Others claim that HP's other financial metrics trailed the industry on his watch. Also, during his tenure, R&D and innovation was cut drastically since they cost too much. In any case, he resigned (or some say the Board gave him that as the better option) after he was accused of falsifying expense reports amounting to $20,000. Some say the expenses were used to cover up a relationship he had with a female marketing consultant who initially alleged that he sexually harassed her. This came four years after the board was accused of spying on journalists and board members to find the source of news leaks. Mark Hurd was initially implicated but later cleared. Mark Hurd's severance package upon his exit was estimated at $40 million.

To replace Mark Hurd, the HP board must have totally lost its collective mind. It hired Leo Apotheker, the former CEO of the German enterprise software maker SAP. Too bad they did not properly vet Leo's background before hiring him. If they did, they would have learned that after only 7 months as CEO, he was linked to a software theft scandal that cost SAP a $1.3 billion in damages and that SAP failed to renew his contract. HP bought and overpaid for Autonomy on Leo's watch. To this day, he claims that HP did meticulous due diligence on Autonomy before buying the company. Well, Leo lasted only 11 months at HP, and during that time, he almost completely wrecked the company with HP's stock price declining 49% and former HP director and venture capitalist Tom Perkins quoted in the New York Times as saying "I didn't know there was such a thing as corporate suicide, but now we know that there is." Even so, Leo's severance and take home from this debacle is estimated at $25 million.

Without going through the board's formal nomination process, HP's board found Meg Whitman after her unsuccessful run for Governor of California. From the start, many believed she was the wrong choice for CEO. The two biggest complaints were that she has no experience captaining a sinking ship with low morale (after having three different captains in one year) and she does not have the depth of knowledge in technology to return HP to its innovative leadership roots. Her fans refer to her success at eBay, but her detractors point to her leaving eBay as its growth started to wane. They also bring up the fact that, while Meg ran eBay, the company bought Skype for $4.1 billion only to sell it at a loss to Microsoft for $2.75 billion. They also say that eBay's acquisition of PayPal had great promise but that it failed to innovate and expand that platform to reach its potential during her watch. These examples are reminiscent of HP buying Palm for one billion and totally squandering that investment.

Given HP's string of misfortunes since 1999 in a high-tech marketplace increasingly dominated by the Gang of Four (Amazon, Apple, Facebook, and Google), cutting costs is only a short-term strategy that will not set the ship on the right course. For HP, the solution is to innovate unique products that give HP a competitive advantage. Investing in the past, such as buying PC businesses that are low margin and low growth are not strategies that will allow HP to realize its enormous potential. Innovation made HP great. It can make the Company great again. The plunging stock price that resulted from the latest revelation about Autonomy does not inspire confidence that HP is moving in the right direction. Hopefully, there is a technology or product on the horizon that will help HP to get back on a profitable course. HP fans are hoping to see that very soon because there may not be a lot of time left if the losses continue.

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